…This is the second of several blogs outlining criticism of the State of Oregon budgeting processes, which is important as voters here consider a major new tax increase…

PERSPECTIVE FROM THE 19^TH HOLE: This is the title I chose for my personal blog, which is meant to give me an outlet for one of my favorite crafts – writing – plus use an image from my favorite sport, golf. Out of college, my first job was as a reporter for the Daily Astorian in Astoria, Oregon, and I went on from there to practice writing in all of my professional positions, including as a Congressional press secretary in Washington, D.C., an Oregon state government manager in Salem and Portland, press secretary for Oregon’s last Republican governor (Vic Atiyeh), and a private sector lobbyist. This blog also allows me to link another favorite pastime – politics and the art of developing public policy – to what I write.

Back in 2003, the Oregon Legislature came up with an idea that sounded questionable, but was based on explicit U.S. government permission.

It was this:  Impose a special tax on 16 major Oregon hospitals, take the money into the hands of state government, then use it to garner federal matching funds under Medicaid, the joint state-federal health care program for low income citizens.

Everyone wins, right?

Well, perhaps not the federal government, which had to shell out more money in matching funds, but the purpose was positive in the eyes of most people — provide more and better health care services for low income citizens.

It didn’t work out as planned, especially not for Oregon hospitals or the citizens they serve.

The transaction illustrated what could have been suspected back then, but wasn’t as clear as it is today:  It is impossible to negotiate a deal with the legislature, then expect that deal to hold up, even for one two-year budget cycle.

Something always intrudes.

Legislators and the governor forget the deal they cut, so they don’t honor it.  Or, a new “emergency,” real or imagined, comes up and the deal is off.  Or, even more perversely, legislators appear to honor the deal and devote the “new money” to health care, then, in a back room and out of public view, they take “general funds” out from behind the deal and allocate it elsewhere, including to the legislature’s top political priority — K-12 education.

So, does the hospital tax make sense?

To some, the answer might be yes if they want government to have more money.  In other words, the lure of the federal match drives the process – and, at the moment, this is the case in 49 states, as well as in the District of Columbia.

To others, the answer also might be yes if the general purpose is served — more health for low-income persons who don’t have access to health care otherwise.

To hospitals, the answer might be yes if, in fact, they would get back money for the tax they pay, which, after all, was the original design of the program.  But, as it is today, not all hospitals get back all of “their” money and the new money for Oregon often goes to other than health care programs.

To taxpayers, the answer also is murky.  Could be yes or could be no, depending on an individual’s political persuasion. If you want more government and believe taxes should be increased, you would be in favor of the transaction. If, on the other hand, you believe government should be more frugal in how it allocates money, you would oppose the tax scheme; after all, it results in more federal and state spending.

Back to hospitals.  They have operated in good faith in this kind of transaction, but have suffered because of the realities outlined above, which underline again the inescapable conclusion:  You can’t negotiate and cut a deal with the legislature and expect it to be honored.

Along the way, hospital lobbyists have insisted on “memoranda of understanding” (MOU) to memorialize the deals over the years and, while not ironclad, the MOUs provided a bit of assurance that the legislators and the governor who signed them would live up to the deals.

No.  There was only one legislator who was at the table during the negotiations who admitted in public that legislators did not live up to what they signed.  That was Senator Betsy Johnson, the Democrat from Scappoose, who is one of the legislature’s chief budget experts, not to mention a public official marked by candor and integrity.

She announced that legislators and the governor had reneged on the deal to her chagrin. Her position was that legislators should honor it.

All of this will matter down the road if legislators and the health insurance industry sit down in a room to negotiate an extension of a health insurance tax, which, again, is designed to garner more federal matching dollars.

As originally designed, proceeds from the insurance tax and matching dollars were supposed to fund health insurance for children who did not have coverage.

It didn’t work out that way.  Legislators said they needed the money elsewhere and they took it. In the vernacular of the Ways and Means process, this is called “sweeping” the money.

And, this time, hospitals were not the ones left out in the cold.  It was citizens who had commercial insurance coverage.  A one per cent tax was added on to their insurance premiums and the insurance companies then sent the money to state government where it performed the magic of gaining federal matching dollars. So, the insurance tax was a tax on general citizens.

It is not clear how long this house of cards will be allowed to stand, either for hospital or insurance taxes.

At some point, observers expect the federal government to say, whoa, we are spending a lot of money on this, given that the 49 states and the D.C. now impose provider and insurance taxes.  We’ve got to stop, they may say.

When the federal government does say no, the question remains — what will states like Oregon do to replace the lost money?  The betting in this corner is that they will leave the hospital and insurance taxes in place, without the federal match.

Once a new tax is on the books, it stays on the books, even if the rationale goes away.

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[Full disclosure: The author, Dave Fiskum, represented private health care interests in Salem for 25 years. He was at the table in 2003 when the hospital and health insurance taxes were first envisioned and he watched – not to mention opposed – actions to renege on the deals.]